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3 Energy Stocks That Are Better Bets Than EOG Resources

While reserves look impressive, performance does not.

When a company's proved reserves of oil and gas hit nearly 2 billion barrels of oil equivalent (Boe), it's natural for investors to begin salivating at the prospect of monetizing those assets.

It just so happens that Houston-based EOG Resources(NYSE: EOG) boasts exactly this amount of reserves. With 72% of these reserves sitting in natural gas -- the most exciting commodity in the near future -- it's only a matter of time before huge interest will find its way to the company. But how good does this company look to investors in terms of profitability and future growth?

Performance so farWhile ample reserves will always be seen in a positive light, investors must gauge a company's ability to convert those reserves into tangible revenue and returns. In that regard, EOG's earnings don't exactly look pretty.

Earnings before interest, taxes, depreciation, and amortization (EBITDA) have fallen over the past five years. Its compounded annual growth over this period stands at -4.8%. Operating income also fell, registering a 34% decline over the past five years.

Total production for EOG has indeed risen by 17% since 2008, which includes a 64% rise in crude oil production. It's worth noting that the company has taken advantage of prevailing market conditions.

This does not look goodThe stock's declining returns, however, look worrisome. Return on equity is currently 1.6%, down from the 20.6% the company generated in 2007. Returns on assets have plunged to 0.8%, from 11.2%. Foolish investors should take note.

How cheap is the stock?Adding to the uninspiring news, the stock looks expensive. The price-to-earnings ratio stands at 188.1 for EOG, which makes it look far more expensive than Chesapeake(NYSE: CHK) at 13.3, Anadarko Petroleum(NYSE: APC) at 53.9, and ExxonMobil(NYSE: XOM) at 13.5.

Price-to-book weighs in at 2.9, while Chesapeake at 1.7, Anadarko at 2.0, and Exxon at 2.8 look better-placed.

Foolish bottom lineAs of now, I'm not really impressed with EOG Resources, despite its very attractive reserves. Still, you can never write off this company, given that a turnaround is always possible. With higher natural gas reserves in its bag, the future does look bright. If the company can increase production while keeping down costs, I might give EOG a second thought.